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ENERGY REVIEW

31 December 2018

It is always tempting to make a simple comparison between economics and politics, but when OPEC meetings and the British House of Commons’ behaviour are compared with each other, one thing is clear: where there is supply and demand, a deal can always be made, but where there is a choice between a rock and a hard place, a country can become aimless, directionless and leaderless.

Early in December the OPEC members plus another ten countries met and decided to cut oil production. In an attempt to reduce the volatility of the price of oil as the world economic growth outlook for 2019 starts looking lower than it was for 2018, the meeting’s participants debated the issue and came up with an agreement – sorted.

With the date of Brexit looming in March 2019 and the EU waiting for the UK parliament to rubber-stamp a deal the EU and the UK Prime Minister have agreed on, Theresa May has backed down and postponed the vote on ‘her’ deal. Several times a day there were rumours of her being sacked, drawing comparisons with the removal of the British Prime Minister Neville Chamberlain in 1940, who failed to deliver the required leadership performance during the beginning of World War II. We read words like humiliating, incompetent, poor salesmanship, lack of public speaking skills, inability to stay in tune with the changing mood of the country. If she were CEO of a profit-making institution, Mrs May would have struggled to convince her Board of Directors. All this only to end up with the ‘no confidence vote’ on 12 December confirming there is no-one who could take over with any decent credibility.

However, only 63% voted for her to remain: hardly an overwhelming endorsement. In fact Margaret Thatcher, with more votes in her favour, thought it was not enough for her to continue – and she resigned.

In spite of this vote, it does not mean it will be easy for Mrs May to get ‘her’ deal through parliament and it is still not clear where Britain is heading. In spite of this ‘vote of confidence’ Mrs May is not in a position to go back to the EU and tweak the deal the majority of the house does not even want.

After a brief period of considering the potential outcomes of varying types of Brexit, energy companies have decided to ignore most of the mooted scenarios because none of them have anything like the certainty businesses like to have when weighing up the alternatives before making a decision. When looking at the potential in the UK-, EU-, EFTA- and EEA-waters, oil and gas companies are saying: if there is something out there which can help us make money, let’s go for it and we will deal with Brexit issues once they have been identified and can be confronted – very pragmatic and sensible.

In our News sections we report on quite an array of incidents and casualties befalling the oil and gas industry. We see how Lloyd’s and other carriers are preparing for the end of one of the four Freedoms of the European Union. And, as one individual said with a mixture of perception and faith, Pity about financial services but the City Boys will somehow sort out something”. It has been a busy time for the movement of people and their skills in the energy insurance market. Some key individuals have surprised their colleagues with decisions to make career-changing moves.

2018 has been an interesting year and we think that 2019 will be even more so. With the Festive Season upon us, we wish our readers a happy time with family and friends and around the corner a successful New Year.


Energy Casualties

 

Libya declares force majeure at largest field

Libya declared a state of force majeure at its largest oil field after an armed group forced a production halt, just days after OPEC exempted the country from global crude output cuts.

The shutdown at the Sharara field will result in a production loss of 315,000 barrels a day, the State energy producer National Oil Corporation (NOC) said on its website. Sharara is operated by a joint venture between the NOC and Total SA, Repsol SA, OMV AG and Equinor ASA, known formerly as Statoil ASA.

The halt will also reduce Libya’s output by an additional 73,000 barrels a day at the El-Feel, or Elephant, field due to its dependence on Sharara for electricity supply, the NOC said on 10th December.

El-Feel is operated by a joint venture between Eni S.p.A. and the NOC. Force majeure is a legal clause protecting a party from liability if it cannot fulfil a contract for reasons beyond its control.

Libya, with Africa’s biggest oil reserves, has struggled to raise and maintain production amid political divisions, conflict and lawlessness that have crippled its energy industry since a 2011 uprising. A week earlier, OPEC and other global oil producers approved a new round of output cuts aimed at shoring up crude prices, but exempted Libya due to its persistent internal strife.

Protesters’ demands
The total daily cost of the latest halt is US$32.5 million, the NOC said. Production at the Zawiya refinery is also at risk because it relies on crude from Sharara and will stop processing fuels for domestic consumption unless it can find alternative supplies, the company said.

The shutdown came after protesters, angry at what they say is the Tripoli Government’s negligence of the region, stormed the field, demanding better services and health care.

The NOC had warned earlier that members of the Petroleum Facilities Guard, which is responsible for securing the country’s oil facilities, had threatened workers at the field in a bid to prompt a shutdown amid demands for better pay.

On 9th December, a spokesperson for a group of protesters called the Fezzan Anger Movement had threatened that they would close down Sharara by that evening if their demands were not met.

On 10th December the NOC ordered the group to leave the deposit immediately, without precondition, and said it would not take part in negotiations with the militia.

Output target
Libya plans to pump as much oil by the end of next year as it did before the 2011 revolt, which ousted former strongman Muammar Al Qaddafi, with a target of 1.6 million barrels a day, NOC Chairman Mustafa Sanalla had said in October.

The country pumped 1.18 million barrels a day in November, data compiled by Bloomberg shows.

Protesters have repeatedly threatened to shut down production in Sharara and other oil fields, often demanding better pay or services.

In July, Sharara endured an output loss after gunmen stormed one of its stations and kidnapped four of the staff.

Oil wells in the area were temporarily shut down as a precaution.

Cyber-attack targets Italian oil-services firm Saipem

The Italian oil-services company Saipem S.p.A. is still assessing the scope and impact of a cyber-attack which targeted its servers in the Middle East, according to the head of digital and innovation.

“We’re keeping the servers down to understand what happened,” Mauro Piasere said on 11th December. Once that’s clear, “we will be able to load the backup”.

The Milan-based company said earlier on 11th December that it had detected a cyber-attack and was taking actions to restore normal activities, without giving further details.

Mr Piasere said servers in the Emirates and Saudi Arabia were hit the most, with attackers seeking to obtain administrative data. The only attack in Europe was in Aberdeen, where the company employs fewer than 30 people.

It is still unclear where the attack originated or who was behind it, Mr Piasere said.

There are numerous potential perpetrators.

“As a significant international oil and gas leader, Saipem is part of one of Italy’s core critical infrastructures, and this positioning attracts a perfect storm of both financially motivated and State-sponsored attackers,” said Stefano Zanero, a professor of computer security at the Italian university Politecnico di Milano.

“Saudi Arabia, and the Middle East in general, is a very sensitive region which could point to either economic espionage, State-sponsored information gathering or even a hacktivism-inspired incident,” Mr Zanero said.

US Coast Guard orders Louisiana oil company to stop 14-year-old Gulf of Mexico oil leak

The United States Coast Guard (USCG) has ordered Taylor Energy Company to contain and clean up an ongoing oil spill in the Gulf of Mexico, which the Federal Government says has leaked more than a million barrels of oil since 2004.

According to the Washington Post the order was issued on 23rd October 2018, and the company faces fines of US$40,000 per day if it fails to comply.

Neptune addresses pipe corrosion at North Sea Cygnus complex

Third-quarter gas production from the Cygnus field in the UK southern North Sea was 8% higher than in the corresponding period for 2017, according to operator Neptune Energy.

However, two shutdowns took place due to corrosion failures in the vent line, although the corroded section of the piping has now been replaced.

During next year’s scheduled shutdown, Neptune will replace the entire line with a permanent corrosion-resistant alloy section to ensure better performance in future.

Drilling continues on the Cygnus FB9 exploration well – any commercial volumes discovered could be tied into the existing offshore infrastructure.

In the Norwegian North Sea, Neptune plans tiebacks to the Gjøa subsea infrastructure of the Cara field in license PL636 and the PL153 P1 accumulation.

The company is aiming for project sanction in both cases early next year, followed by start-up by end-2020.

White Rose shut in by storm, leaks oil

Husky Energy Inc. used remotely operated vehicles to investigate the cause of an oil leak at White Rose field, offshore Newfoundland and Labrador, on 16th November, where production had been shut in the previous day because of severe weather.

The company said all production wells were secure and believed the leak occurred at a subsea flowline.

It said on 19th November that no additional oil had been detected on the surface since the original leak, which the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) called a “batch spill”.

The incident caused no injuries. The C-NLOPB said surveillance flights and inspection by a support vessel indicated no harm to wildlife or seabirds.

In September, White Rose produced an average of 23,640 b/d of oil and 122.5 MMcfd of gas through the Sea Rose floating, production, storage and offloading vessel.

The C-NLOPB said operations at other facilities in its area – which include Hibernia, Hebron and Tierra Nova fields – would not resume “until the C-NLOPB has determined that it is safe to do so”.

Its initial estimate of the spill size was 1,570 bbl.

Offshore safety watchdog to investigate ‘Maersk Invincible’ incident

Norway’s offshore safety body, the Petroleum Safety Authority (PSA), has decided to launch an investigation into an incident involving dropped objects on the Maersk Invincible drilling rig.

The PSA said on 14th November that the incident on the Maersk Invincible occurred on 11th November.

The jack-up rig, owned by Maersk Drilling, is currently working for Aker BP on the Valhall field in the Norwegian North Sea.

According to the safety body, the incident occurred in the drilling module. Two swell packer stands came loose from the fingerboard, slid from one side of the derrick to the other, and ended up in a gangway.

The safety agency added that each of the stands, made up from lengths of drill pipe, is specified as weighing a tonne.

Fortunately, no injuries were reported as a result of the incident. A PSA team is conducting the investigation.

Objectives of this investigation include clarifying the course of events, describing the actual and potential consequences, and identifying the direct and underlying causes in order to contribute to learning lessons and experience transfer.

As for the rig, the Maersk Invincible is an XL Enhanced ultra-harsh environment jack-up rig.

It was delivered by Daewoo Shipbuilding and Marine Engineering (DSME) in South Korea in January 2017. The rig arrived in Stavanger in late March 2017.

Aker BP received consent from the PSA to use the Maersk Invincible rig for production drilling, well operations and as a flotel on the Valhall Flank North and Valhall Flank South fields in August 2018.

Armed pirates attack LNG tanker off Nigeria’s coast

Armed pirates have chased and shot at a liquefied natural gas (LNG) tanker off Nigeria’s coast, the second time in as many weeks a vessel has been attacked in the area.

At least nine assailants made an unsuccessful attempt to board the vessel on 6th November, the International Maritime Bureau said in a report on its website.

“The pirates approached the vessel several times but due to its increased speed and evasive manoeuvres, the pirates were unsuccessful and later aborted the attack,” it said. “Vessel and crew reported safe.”

The incident followed an assault on the German-flagged MV Pomerania Sky on 27th October, when 11 foreign crew members were taken hostage. The Nigerian Navy said it was working to rescue them.

Sole pipeline test reveals defect

Cooper Energy has said that testing of the newly-installed Sole pipeline in the eastern Gippsland basin, offshore Victoria, south-east Australia, has revealed localised damage.

Subsea 7 laid the 65-kilometre (40.4-mile) line which connects production from the Sole field wells to the onshore Orbost Gas Plant.

There are no hydrocarbons in the pipeline at present.

An acceptance pressure test of the line with water (hydrotest) revealed an anomaly was preventing the pipeline from holding internal pressure.

This was identified subsequently as a through-wall thickness opening at one location. The opening has been observed in the pipe itself and not at a weld, Cooper stressed.

Subsea 7 is assessing the damage to the pipeline and working on plans for a repair, prior to completing the hydrotest.

Cooper expects commercial gas sales to start as scheduled next July.


Insurance News

 

US intends to sign post-Brexit insurance pact with Britain

The US Treasury and US Trade Representative’s (USTR) office said on 11th December that they intended to sign a new bilateral insurance agreement with Britain which will provide insurance market regulatory certainty and continuity after Britain leaves the European Union.

The Treasury and USTR said the US-UK Covered Agreement would be consistent with a similar agreement signed with the EU in 2017. Britain is scheduled to leave the EU on 29th March 2019.

The announcement starts a 90-day notification period required by the US Congress before it can be signed and put into effect.

The US-UK agreement affirms the US State-based system of insurance regulation and is expected to aid the competitiveness of US insurance and reinsurance firms, the Treasury and USTR said.

Britain’s trade commissioner for North America, Antony Phillipson, welcomed the Treasury and USTR announcement, saying that it was part of work that the British Government has been doing to ensure US-UK business continuity while exploring further bilateral trade ties.

“I am very pleased that we’ve been able to preserve the benefits of the EU-US covered agreement for UK firms in the US, the largest insurance market in the world, once the UK has left the EU,” Mr Phillipson said in a statement released by Britain’s embassy in Washington.

EU subsidiaries update for Liberty, RSA, SCOR, Tokio Marine, Lloyd’s & A.M. Best

Liberty receives regulatory nod for Luxembourg hub
Liberty Specialty Markets has secured a licence for its European insurance company Liberty Mutual Insurance Europe SE (LMIE) to operate from Luxembourg.

The new licence will enable Liberty to continue conducting insurance and reinsurance business in Europe post-Brexit.

The Luxembourg-based company will be led by Dirk Billemon, LMIE’s General Manager. Billemon, previously of Fortis Luxembourg, was recruited by Liberty earlier this year.

LSM said that it will continue to maintain its UK presence.

RSA secures approval for Brexit plan
On 4th December UK-based RSA Insurance Group announced that it is transferring its European insurance business to its new Luxembourg office in preparation for Brexit.

SCOR gets green light for new P&C specialty firm
Reinsurer SCOR has received the French supervisory authority’s approval for SCOR Europe SE, the new Paris-based P&C specialty insurance company it is creating to ensure business continuity post-Brexit.

The licence will enable SCOR to operate within the European Economic Area (EEA) with effect from 1st January 2019, and ensure the continuity of services offered to its insured clients in view of Brexit.

Starting next year, SCOR Europe will underwrite all new and renewed business relating to risks located in the EEA which can no longer be accepted by SCOR UK Company after the UK leaves the EU.

The new company will also take over all commitments from policies previously issued by SCOR UK Company if the latter can no longer honour these following Brexit. SCOR UK Company will continue to serve all its clients in the rest of the world.

Tokio Marine secures approval for Brexit plan
Tokio Marine Group is transferring its existing portfolio of policies written out of Continental European operations to its newly-established subsidiary Tokio Marine Europe (TME) in Luxembourg in preparation for Brexit.

The group has received approval from the High Court of England and Wales to complete its Part VII transfer process.

“Gaining approval from the High Court is a major step in securing our Brexit plans,” said Thibaud Hervy, Chief Executive Officer of TME.

“Regardless of the outcome that may result from the Brexit negotiations, TME will be able to ensure that all brokers and clients continue to receive the highest level of service.”

In May 2018, the company announced its plan to set up Tokio Marine Europe in Luxembourg for writing European business after the UK’s exit from the European Union.

Lloyd’s opens Brussels office
Lloyd’s has opened its insurance subsidiary in Brussels which is set to allow the market to continue operating and serving its clients in the EU after Brexit.

Lloyd’s Brussels is Lloyd’s first Europe-wide operation and will bring Lloyd’s expertise closer to its customers and partners in Europe, according to a corporate statement.

“Lloyd’s is ready for Brexit with Lloyd’s Brussels now officially open for business,” said Lloyd’s Chairman Bruce Carnegie-Brown. “Our decision to set up an insurance company in Brussels has provided certainty to our partners and customers throughout Europe, reassuring them that they can continue to benefit from Lloyd’s specialist expertise and financial security post-Brexit.

“We are already working with our partners on 2019 policies, and Lloyd’s Brussels is now placing and processing European risks.

“Now that Lloyd’s Brussels is operational, we are looking forward to the new opportunities which we will have to grow our business with European customers through a locally staffed, locally regulated and locally capitalised insurer.

“By using electronic placement and digital data capture, Lloyd’s Brussels offers its partners in Europe the very best that Lloyd’s has to offer in an easily accessible and cost-effective way.”

Lloyd’s Brussels is a subsidiary of Lloyd’s with 19 European branches, working with over 400 coverholders and 40 Lloyd’s brokers spread across Europe. It was set up to ensure that customers and partners in the European Economic Area (EEA) continue to have access to Lloyd’s services and expertise, while also facilitating continued growth and further digital transformation, the corporation said.

The company is established and operational with 50 staff based in the Belgian capital as well as 45 other staff across the continent.

Lloyd’s Brussels writes all non-life risks, as well as facultative and non-proportional excess of loss treaty reinsurance, and since the beginning of November has started accepting and processing EEA risks with inception from 1st January 2019.

Lloyd’s Brussels is authorised and regulated by the National Bank of Belgium.

A.M. Best picks Amsterdam for new Europe unit post-Brexit
Rating agency A.M. Best has unveiled its new subsidiary, A.M. Best (EU) Rating Services, based in Amsterdam.

The new office will enable the agency to continue to provide ratings to be used for regulatory purposes post-Brexit across the EU member nations. A.M. Best (EU) has been registered with the European Securities and Markets Authority (ESMA) as a credit rating agency (CRA).

The agency’s London-based subsidiary, A.M. Best Europe – Rating Services, is at present registered with ESMA in Paris, which allows it to provide rating services throughout the EU on a cross-border basis.

The London office will continue to act as its hub for the EMEA region. A.M. Best plans to register it with the UK Financial Conduct Authority (FCA) which is assuming responsibility for the supervision of UK-based credit rating agencies post-Brexit.

A.M. Best said it selected Amsterdam for its new European office because of its well-established financial centre, excellent talent pool and good transport links to all the major European locations.

“We welcome this news that our application has been successful. ESMA’s registration of A.M. Best’s Amsterdam office enables us to prepare for any kind of Brexit outcome, to ensure continuity of our rating services for our clients,” said Roger Sellek, Chief Executive of A.M. Best’s Europe, Middle East, Africa and Asia Pacific operations.

Nick Charteris-Black, Managing Director, Market Development for A.M. Best Europe, Middle East and Africa, added: “The Amsterdam office reinforces A.M. Best’s ambitious growth agenda for continental Europe and demonstrates our commitment to providing continuity of rating services throughout the EU post-Brexit whilst developing our coverage in other international markets across the broader EMEA region from London.”

Beazley and AEGIS lead the Lloyd’s electronic placement table

Beazley Syndicate 3623 and AEGIS Syndicate 1225 are leading the ranking of electronic placement adoption at Lloyd’s, according to a new table published for the first time by the London Market Group (LMG).

Beazley Syndicate 3623 (Beazley Furlonge) had an electronic placement adoption rate of 61% while AEGIS Syndicate 1225 (AEGIS Managing Agency) reached 60%.

They are followed by Allied World Syndicate 2232 (Allied World Managing Agency) with 51% and Apollo Syndicate 1969 (Apollo Syndicate Management) with 50%.

The Corporation of Lloyd’s had introduced a mandate for electronic placement in March 2018 requiring minimum targets for electronic placement of risks.

From the end of the second quarter this year, each syndicate was required to have written no less than 10% of its risks electronically. This target rises by 10% each quarter until the fourth quarter of 2018 to reach 30%. Further targets will be confirmed prior to the end of the period.

Louise Day, Director of Operations at the International Underwriting Association (IUA), commented: “The number of risks accepted via Placing Platform Limited (PPL) continues to grow across the company market with several firms doubling their trade on the platform since the previous quarter. IUA members comprise many different business models and processing arrangements, yet support for PPL is widespread with adoption rates matching those achieved by Lloyd’s managing agents.”

But there are also syndicates which missed the targets. Outgoing Lloyd’s CEO Inga Beale had said when introducing the electronic placement mandate in March 2018 that “those who fall short will be required to contribute towards the costs of modernising the market”.

The laggards in the adoption league for electronic placements are Syndicate 2525 (Asta Managing Agency Limited) and Skuld Syndicate 1897 (Asta Managing Agency Limited) both with a 4% electronic placement adoption rate. They are followed by China Re Syndicate 2088 (Catlin Underwriting Agencies Limited) with 9% and Novae Syndicate 2007 (AXIS Managing Agency Limited) with 13%.

Most insurers on track in Brexit preparations: A.M. Best

The majority of insurance groups which are affected by Brexit and rated by A.M. Best have either completed or initiated a transfer of their European Economic Area (EEA) business from their UK insurer to an affiliated EEA insurer under Part VII of the Financial Services and Markets Act 2000, according to the agency.

“Many companies have chosen to establish new EU subsidiaries, said Catherine Thomas, Senior Director, Analytics at A.M. Best.

“Meanwhile, small insurers that do not have the resources to create additional companies have formed relationships with local carriers that will be able to front business for them. A.M. Best expects rated insurance groups affected by Brexit to have these subsidiaries or arrangements in place by March 2019, ensuring that they are able to underwrite EEA business going forward, even in the absence of a transition period.”

When the UK withdraws from the EU, and at the end of any transition period, passporting rights that currently exist between the UK and the EEA are expected to cease.

“The Part VII transfer process is expensive and time consuming, with transfers subject to extensive regulatory scrutiny and court approval,” said Yvette Essen, Director of Research at A.M. Best.

“The process is further complicated if business has been underwritten on a pan-European basis, as is often the case for large commercial clients, as it is difficult to separate assets and liabilities into UK and other EEA components. Consequently, a number of Part VII transfers will not be complete by the end of March 2019. In these cases, a transition period following the UK’s withdrawal from the EU is necessary to allow time for the transfer of policies to be completed.”

Once passporting rights are lost, UK-domiciled insurers will no longer be able to issue insurance contracts in the EEA. It is also possible that, in the absence of a political solution, they will not be able to service existing EEA contracts by settling and paying claims, A.M. Best said. In the event of a ‘no-deal’ Brexit, this could come into effect as early as 29th March 2019.

A.M. Best warned that the creation of a licensed EU subsidiary or affiliate does not address the issue that a UK insurer may not be able to service existing EEA contracts following a loss of passporting rights. It is the hope and expectation of the insurance market that a political solution will be found to this problem; for example, by allowing grandfathering of existing contracts, the agency noted. In spite of this, affected insurers are putting contingency plans in place and exploring their operational and legal ability to settle claims and provide other services to policyholders in individual EEA jurisdictions, it added.

Article dated 19th November 2018 

RSA restructures London market business, exits three lines as profits slump

RSA Insurance Group has revealed its plans to scale back London Market exposures and restructure its specialty and wholesale business following a strategic review of all of its portfolios.

The insurer has concluded that its international construction, international freight and fixed price marine protection and indemnity insurance business lines are unlikely to satisfy the group’s profitability requirements in the foreseeable future. Hence, RSA is exiting these lines of business with immediate effect or at contract expiry.

RSA’s London Market business, reported as part of RSA’s UK and International region, will now focus on four key specialisms, including international hull; international cargo and transportation; international property; and international engineering and renewable energy risks.

RSA said these core portfolios, whilst subject to rigorous and selective underwriting, will allow it to concentrate on areas of existing strength and establish a platform for profitable growth in the future.

The changes are part of an ongoing review to streamline the group’s international exposure, improving underwriting, pricing accuracy and risk management.

RSA’s London Market portfolios in international marine cargo and international marine transportation will be restructured into one unit under new leadership, with exposures in both areas significantly reducing as the company focuses on targeted areas where sustained profitability can be achieved.

According to the insurer, these actions are expected to reduce premiums written through the London Market by RSA by around one third year-on-year (2018 vs 2019).

EU equivalence regime for the London Market: LMG and LIIBA

London Market needs EU equivalence regime change in Brexit deal: LMG
The UK Government has recognised that the London Market does need to see significant changes to the EU equivalence regime but there are no equivalence frameworks for insurers under Solvency II or for brokers under the Insurance Distribution Directive, said Clare Lebecq, CEO of the London Market Group (LMG).

Earlier in November, The Association of British Insurers (ABI) welcomed the prospect of a Brexit deal which includes a regulatory equivalence regime for financial services with the EU enabling mutual market access.

An equivalence regime would mean that the EU recognises the financial services standards and their enforcement in the UK as equivalent to the EU. In theory, both parties would remain free to set their own standards and market access as long as regulatory outcomes are broadly the same.

The EU has developed an equivalence approach for financial services with Japan, the US and Canada.

But such a standard approach may not work for the London Market.

“The EU has long recognised that the treatment of firms providing financial services to sophisticated, commercial clients should be more flexible,” Ms Lebecq said. She stressed that access to the right markets is key if EU clients should continue to benefit from competition amongst service providers.

“In other sectors, such as investment management, this is recognised, and appropriate equivalence regimes exist to preserve EU client access to appropriate third countries. We are keen to ensure that both sides of the negotiations see the mutual need to extend this sort of arrangement to insurance and insurance intermediation,” Ms Lebecq explained.

The LMG is working with the UK Government to show how these precedents could be leveraged to allow a mutually beneficial trading relationship to continue in insurance, Ms Lebecq noted.

“We have had a positive response so far and will continue to develop these proposals because we need a solution that works for the whole market; for brokers, carriers and reinsurers,” she said.

The Brexit deal which the UK Government has negotiated with the EU was due to be put for vote in parliament on 11th December.

There is a good chance that the deal will be voted down, according to market observers, which may mean that the UK leaves the EU without a deal.

“If we do see the deal voted down, then the government and parliament may well need to consider other options,” Ms Lebecq said. “LMG has been clear, however, about the negative consequences of a ‘no deal’ for the industry and where this would leave our clients,” she added.

The LMG has been warning about the challenges regarding the fulfilment of contracts in a ‘no deal’ scenario. “It would be unacceptable to see EU clients left in a detrimental position, not knowing whether their claims would be paid or not,” Ms Lebecq said.

Some member state governments such as France and Germany are introducing contract continuity laws in the event of there being no deal with the UK.

“If the current deal goes through, the next stage is for the government to see if they can find a future arrangement which preserves as much cross border trading as possible,” Ms Lebecq said.

“Our Brexit Taskforce, representing all elements of the market, was disappointed that the government felt it could not pursue a mutual market access agreement, but we have continued to work with them to propose alternatives,” she said.

Brexit deal’s focus on equivalence ‘unfortunate’ for insurers and brokers
The Chief Executive of the London and International Insurance Brokers’ Association (LIIBA) has voiced concerns that the draft Brexit agreement reached by the UK and European Union does not address or resolve the body’s fundamental concern: a lack of clarity around the Insurance Distribution Directive (IDD) which could jeopardise the ability of brokers to operate in Europe.

Christopher Croft, Chief Executive of LIIBA, said: “While it is encouraging to see a dedicated section on financial services, we have to hope that the fact the draft is solely built around the concept of ‘equivalence’ is for the sake of brevity and simplicity. Otherwise, those of us who have no equivalence regime have cause for serious concern. As do our clients.

“The current European legislation covering insurance brokers – Insurance Distribution Directive – has no concept of equivalence or the market access rights it might grant. Without this it is unclear what the agreement published yesterday would mean for our sector.”

Speaking at a joint LIIBA-Lloyd’s Brexit seminar, Mr Croft stressed that the lack of clarity around the IDD meant that, to date, no European Union regulator had confirmed a belief that a wholesale broking model would be acceptable.

Mr Croft said: “Most regulators are expecting EIOPA to provide clarity for brokers but our understanding is that EIOPA does not intend to do so. This is because the scope of IDD is a matter for the European Commission. However, the Commission is unlikely to do anything which could be seen to be prejudicing the negotiations.”

Meanwhile, other commentators have noted that the focus on equivalence is not necessarily helpful because equivalence under Solvency II does not grant market access for insurance business. But they also note that a solution may be possible for reinsurers.

Bob Haken, Insurance Partner at Norton Rose Fulbright, said: “What the Political Declaration does say about financial services in general is that there will be commitments to ‘preserving financial stability, market integrity, investor protection and fair competition, while respecting the (UK’s and the EU’s) regulatory and decision-making autonomy, and their ability to take equivalence decisions in their own interest’.

“This focus on equivalence is unfortunate for the insurance industry as, unlike some other financial services, equivalence under Solvency II does not grant market access for insurance business (reinsurance is treated differently under Article 172 of the Solvency Directive pursuant to which equivalence does come with market access).

“At present, therefore, it seems unlikely that the Withdrawal Agreement or Political Declaration will preserve passporting rights for UK insurers.

“For reinsurance, there is a glimmer of hope in that there is a commitment to reaching equivalence decisions as soon as possible after the 29th March 2019, endeavouring to conclude those assessments by the 30th June 2020.

“However, in a missed opportunity, neither document recognises the important issue of contract continuity following the expiry of the transitional period, meaning that the contingency plans that many hoped would be unnecessary will have to be deployed by the end of 2020.”

Article dated 15th November 2018 

Charles Taylor expands liability offering with swathe of hires

International loss adjuster Charles Taylor Adjusting (CTA) has expanded its property and casualty offering with the addition of six new loss adjusters specialising in complex corporate liability claims.

The executives specialise in managing public and product liability, construction, pollution and recovery claims across various industry sectors for insurers and corporate clients.

“We are pleased to expand the range of services and technical expertise available to our clients and wider market,” said Andy Rice, Deputy Managing Director, Property, Casualty, Technical & Special Risks, CTA.

“This compliments services already offered by CTA in London and specifically through our UK specialist loss capability led by Clive Williamson, Head of Specialist Adjusting.”

“The newly enlarged team further strengthens our ability to manage highly complex claims across the UK and further afield,” Mr Rice added.


People on the Move

 

CNA Hardy replaces Lloyd’s active underwriter

Specialist commercial insurer CNA Hardy has appointed Carl Day as Active Underwriter, in addition to his role as Head of Property, Marine and Energy.

Mr Day will take on the role from Patrick Gage on 1st January 2019.

In his role as active underwriter for Syndicate 382 he will be responsible for liaison with Lloyd’s and the focal point for the Lloyd’s Underwriting Performance Team.

Mr Day joined CNA Hardy in 2014 from Hiscox to build out its marine and energy capabilities across both company and syndicate platforms.

Tokio Marine HCC taps AXIS for marine liability head

Tokio Marine HCC has named Darren Carr as Head of Marine Liability for its London Market division.

Mr Carr joins Tokio Marine HCC from AXIS, where he most recently served as Head of Marine and managed various underwriting teams, including marine liability, hull, cargo and specie, reinsurance and renewable energy.

Tokio Marine HCC said that Carr’s appointment would support its growth strategy in the marine (re)insurance market as it develops its product offering, which includes marine trades, marine property, protection and indemnity (P&I) reinsurance, and marine and energy liability.

In his new role, Carr will report to Simon Button, Chief Underwriting Officer for Tokio Marine HCC’s London Market division.

Lloyd’s COO Khoury-Haq resigns

Shirine Khoury-Haq, Chief Operating Officer of specialist insurance and reinsurance market Lloyd’s of London, is leaving the corporation after five years.

Ms Khoury-Haq joined Lloyd’s in 2014 and is a member of Lloyd’s Executive Committee. Her responsibilities include global operations, information technology, data, innovation, business transformation and corporate real estate.

Lloyd’s said Ms Khoury-Haq was the driving force behind the creation of the London Market Target Operating Model (TOM) and, as its sponsor, worked with the market to design and deliver the first comprehensive programme to digitise the London re/insurance market and make it easier to do business.

She will continue as COO and a fully committed member of the ExCo until she leaves during the first half of 2019.

Canopius swoops for energy leader from Beazley

Specialty re/insurer Canopius has hired Rachel Sabbarton as a Senior Underwriter within its energy team.

Ms Sabbarton joins from Beazley Group, where she was Deputy Head of Energy. She will report to Geoff Tin before succeeding him in the role of Head of Energy in the summer of 2019.

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